In 2001, Jim Collins wrote a great business best seller entitled “Good to Great: Why Some Companies Make the Leap…and Others Don’t.” In general he defines “great” largely on financial performance several times better than the market norm over a fairly long period of time. Some of the companies that he singled out who made the transition from good to great were: Abbott Labs, Kimberly –Clark, Nucor (steel and industrial conglomerate), Gillette (now a division of Procter & Gamble), Walgreen’s, and Wells Fargo.
He described several characteristics of these winning firms:
1) Humble leaders who do what is best for the long term.
2) First thing is to get the right people on your bus and then decide where to go.
3) Always confront the brutal facts regarding your industry but do not give up.
4) Be disciplined in all things at all times.
5) Remember that small initiatives are additive; they act on each other like the wonder of compound interest.
The book made a lot of us think. I remember vividly at the time if I had the right people on my bus. Last week, I was speaking at length with a general manager of a TV station in a mid-sized market. He told me that things were much better than last year but lamented—“this used to be a great business.” It certainly was. Many years his predecessor in the job had profit margins of 40-50%. The station changed ownership several times in the 70’s and 80’s as financiers felt that TV station ownership was a sure thing. Buy it and flip it several years later for a nice profit was the mantra.
Well, times have changed. In many markets, it is no longer a great business. But, as I stressed to my friend, it is still a VERY good business. And, with a manager such as he who trains his staff well and is fair with them, has close ties to the local community and hustles like hell, it should stay that way for some time to come.
All conventional media are going through this but the stage of downward evolution varies significantly medium to medium. Newspaper was a great business thirty years ago and a good one 15 years ago. Now, with few exceptions, it is a tough battle for survival unless some new technology can bail them out and bring in younger users. Magazines are a really mixed bag with a blend of successes and failures each year with new titles and they all struggle to monetize their online product. Radio could become very good or even great again in some cases if the corporate bean counters go away and local ownership comes back strongly. Outdoor, the last true mass media type, may have a big resurgence as TV continues to fragment and digital options for video multiply over the next several years.
But TV can still do well in the right hands. My friend is a very decent fellow and a hard headed realist. He laughs about his station site which gets into many advertising packages although he cheerfully admits that he feels many of the site visitors are nervous 60 year olds worried about traffic or snow for their evening drive home. Still, he soldiers on, makes a nice living, and does his best to provide value for those to whom he and his staff sell advertising. The days of dropping huge sacks of gold back at headquarters are over. But his station remains solidly profitable for his company which has owned the property for more than 20 years.
The great to good concept is sneaking into other traditionally solid businesses. Someone who fancies himself a securities analyst told me that Coca-Cola and Pepsico have gone from great to good in recent years. My attitude is that there is some truth in his thesis if he is referring to their US business for cola which is quite mature and where the margins are paper thin. But overseas they are just getting started. Indonesia, which some pundits say will be the next BRIC country (Brazil, Russia, India, China) of dynamic economic growth, has a per capita Coke consumption similar to the US in 1910. So, growth overseas for these beverage companies and McDonald’s, among others, should be quite robust as a middle class emerges in what were third world nations only yesterday. The US is only about 5% of the world and we need to keep that in mind.
Finally, I stressed to my broadcaster friend that there is nothing wrong with running and optimizing a good business. The easy money days are over for a lot of us but there is no need to be depressed. If TV truly is doomed a decade or more from now, I bet my plucky friend and his station will be one of the last to fall.
If you would like to contact Don Cole directly, you may reach him at firstname.lastname@example.org